Abstract
The capability concept is commonly used in analyses of firms, however, as this paper shows, it may also be used at the level of nations. Factor analysis is used on a broad set of relevant indicators to derive composite measures of national technological and social capabilities.
The data cover 114 countries worldwide on different levels of development for the period 1995-2013. The paper then analyses the relationships between these capability measures and economic development, defined in various ways, and controlling for other relevant factors.
The results suggest that improving national technological and social capability is a must for achieving (sustainable) economic development and improving living conditions.